Monthly Archives: October 2016

As part of my pre-retire to do list I started to take a good hard look at my investments and evaluate if I need to change anything. So I started pulling together the numbers for my asset allocation (just fixed income vs equities) and got a bit of shock. I had drifted off course by more than a little bit, in fact my target is 60% equities and 40% fixed and I was at 34% fixed and 66% equity. Yikes!

How did this happen? Well I fell victim to the tendency to compartmentalize things. You see I knew my pension was about 50/50 and I knew my RRSPs were a bit off at 35% fixed income, but not too bad. Yet I failed to realize in the last few years that the majority of our money has been going into the TFSA and taxable accounts which is almost all equities. So without really meaning to I drifted off target because in my head I was fine in some of my accounts and I don’t run a total of the entire portfolio all that often for calculating my overall asset allocation. It is a bit of work to look up the split by each account and then roll it up to the total portfolio amount and often doesn’t change that much, so I got lazy about checking it.

But rather than be mad at myself I decided to have a look on ways to fix the issue. One of the first and easy ones was shift my risk profile in my pension. I have always planned on that account to be a bit heavy in fixed income and so I moved a step in my pension options from ‘moderate’ down to ‘conservative’. In a practical sense that shifted the pension money from a 50%/50% split to 70% fixed income and 30% equities. The net result was to shift ~$40,000 from equities to fixed income in one mouse click in a single day which was completed two weeks ago. With that I should be around 40% fixed if I put all the cash in the various accounts into fixed income.

So the that is what I started doing. First up was the fixing the heavy equity weighting in the TFSA and taxable accounts by investing their cash into fixed income. In those accounts my wife and I choose to expand our investing wings a bit and try out a preferred share ETF (stock symbol CPD), so yes it isn’t a bond, but it isn’t fully equity either. A bit of hybrid which works well to boost the cash flow of the fixed income portion of our portfolio. After all the current trailing yield is around 5%, which is a lot higher than a straight bond fund. But to keep things in check we only plan to keep the that ETF to no more than 10% of the entire investment portfolio. So that was just finished up this last week.

The next phase is to re-balance our RRSP accounts to the 40% fixed income weighting via bond ETFs, which shouldn’t require much of an adjustment, but I figure it will be done by the end of next week at the latest. With that we should be sitting around target of 40% fixed income.

Beyond that our final part of the investment plan is actually really boring…cash. Lots of cash. Why? Well there are several reasons including: an emergency fund in the event our investments drop badly, starting cash for our early retirement period and finally a bit of savings for a few expenses we plan in the next year or two (vacations and renovations).

So did you ever drift badly on your asset allocation? If so, how much and how did you fix it?

Those are just a small sample of some of the reactions I’ve seen to my early retirement plans, as you may have noticed they are not particularly encouraging. Actually I would save the majority of comments I see on websites that have a story on early retirement are negative. You can argue the why of that until you run out of air, but in my case I’ve actually cease to care about the negative comments directed at myself.

What I don’t like about those negative comments is I wonder how many early retirement dreams were cut short before they ever began because that sort of feedback. You have to keep in mind that those of us who are discussing our plans publicly are a tiny faction of the overall who just did it and didn’t tell anyone. After all if you are willing to insert a little lie like “I work in private wealth management,” no one will ever know.

The major problem in the beginning for most people is the isolation. With the typical person being negative towards the idea of early retirement, it is rather hard to meet someone who will talk to you as if it could happen. Or even provide some useful feedback on the crazy ideas running around your head. Oddly, I think that is why I got interested in blogging myself: I wanted to share and discuss my ideas. What I didn’t consider was how helpful it was to have someone read a post, leave a comment (good or bad) and indirectly tell me: you are not alone.

The journey to early retirement is a long one. In fact, decades is the normal time frame. So having doubts and being a bit lonely in the journey is entirely a normal feeling at some point. It can be hard at the start to be so excited by the concept, but have no one around you to talk to. So thank the heavens for the internet and personal finance bloggers! Here at last is a group of people who you can talk to in forums, on blogs and now with conferences in person. We can learn from each other and finally have someone tell you: you aren’t crazy, but have you considered this? Again it will be rarely spoken or written, but it is still there: you are not alone.

So the next time you run into someone who is new to the idea of early retirement, try to be patient with them. Not all blogs are the same, they will find one geared to their particular level eventually, just be nice to start with and remember to imply if not tell them: you are not alone. We understand and welcome to the club.

So close to crossing that half a million investment mark, oh well, we should likely cross that next month. But oddly enough I didn’t think we would hit that this year (my prediction was Feb 2017). The pace of investment increases is well past what I was planning as you have to recall at the end of January we were only just past $400,000. So we are on track to gain $100,000 in about nine months, which sort of blows my mind.

Disclaimer

I am not god. I am a mere mortal as such my reality is defined by my own views. So your reality might not resemble mine because of your views. As such all opinions, ideas and investments on this blog might not work for you as they did for me. Be a big person and do your own research and make up your own mind before trying something. The opinions expressed are my own. You might need to contact a local professional for advice.